Wall Street is set to wrap up a strong month next week as stocks gun for new highs

Published Fri, Nov 24 202312:02 PM ESTUpdated Fri, Nov 24 20231:07 PM EST

Wall Street is set to wrap up a strong month next week as stocks gun for new highs heading into year end. Investors have reason to be bullish this month. The major averages have rallied after cooler inflation reports appeared to confirm the Federal Reserve is done hiking, buoying hopes it can start cutting next year. The Nasdaq Composite is on pace to close out the month with a double-digit advance, up 10%. Crucially, the S & P 500 is near key resistance levels at 4,600. A breakthrough past the best levels of this year and last could mean the broader index is clear to reach new highs before the year's out, though concerns remain. The S & P 500 was last trading around 4,560. In fact, Bank of America's technical strategist Stephen Suttmeier said stocks are forming a bullish "cup and handle" pattern that could signal the rally could continue from here. "I think that we do end up possibly setting a new all-time high," said Sam Stovall, chief investment strategist at CFRA. "It's not that bold of a forecast. ... That's easily within striking distance." On Friday, the major averages registered a fourth straight of week of gains . Each index was up by roughly 1%. Bullish momentum A lot is going for the markets right now. In contrast to September and October, which are typically weak periods for stocks, the seasonal patterns are now in favor of equities. November is typically the start of the best six months of the year. And, historically, the market has done well in the final quarter of a pre-election year, and even better for a first-term president seeking reelection, according to CFRA's Stovall. Since World War II, the market has risen 6% on a total return basis, and has never dropped, the strategist said What's more, Treasury yields, which weighed on stocks, are off their highs. The 10-year Treasury yield this week fell to a 2-month low . And a peek into markets show participation has also broadened out. This week, LPL Financial's Adam Turnquist pointed out that more than half, or 55%, of S & P 500 stocks closed above their 200-day moving average. That's more than double what it was at the end of last month. "Overall, we view the recent expansion in breadth as a constructive sign for the health and sustainability of the current recovery," Turnquist wrote. But not everyone is as optimistic on the path ahead. When it comes to the technicals, Wolfe Research's Rob Ginsberg said stocks are quickly approaching overbought levels in the near term, meaning stocks could start giving back the bulk of their recent gains. For 2023, the technician anticipates the S & P 500 will fall to 4,300 or 4,400. "It's almost a mirror image," said Ginsberg. "A month ago, oversold at support. Now, we're overbought at resistance. I think things kind of roll over here." To be sure, he said he will watch how the stocks behave over the next couple weeks. He expects if stocks push through resistance, that could suggest a trend change. However, he maintained the "risk-reward is now skewed to the downside, not the upside." Elsewhere, Morningstar's Dave Sekera expects the recent rally will start to slow in the next week, though some upside could remain between now and the rest of the year. "At this point, it's very near our fair value estimate," Sekera said. "So for long-term investors, while we do think that, at this point, you will continue to earn reasonable returns generating on the cost of equity over time, we no longer see the market trading at nearly the discount that we had seen the market trading back in the end of October when the market bottomed out." Economic calendar Markets will have one hurdle to clear in the week ahead. On Thursday, investors will get the October personal consumption expenditures reading, which is the Federal Reserve's preferred inflation gauge. It's set to show a rise of 0.2%, down from the 0.7% rise in the prior month, according to FactSet consensus estimates. "I do think that if that number were to come out higher or hotter than expected, I think that would call into question the market's current assumption that the Fed has done tightening," Morningstar's Sekera said. "So I would expect that to be very negative for the markets if that number comes in worse than expected." A string of retailers are set to report including Costco Wholesale, Kroger and Dollar Tree. Salesforce will report Thursday. Week ahead calendar All times ET. Monday, Nov. 27 8 a.m. Building Permits final (October) 10 a.m. New Home Sales (October) 10:30 a.m. Dallas Fed Index (November) Tuesday, Nov. 28 9 a.m. FHFA Home Price Index (September) 9 a.m. S & P/Case-Shiller comp.20 HPI (September) 10 a.m. Consumer Confidence (November) 10 a.m. Richmond Fed Index (November) Earnings: Hewlett Packard Enterprise, NetApp, Intuit Wednesday, Nov. 29 8:30 a.m. GDP Chain Price second preliminary (Q3) 8:30 a.m. GDP second preliminary (Q3) Earnings: Costco Wholesale , Synopsys , Dollar Tree , Hormel Foods Thursday, Nov. 30 8:30 a.m. Continuing Jobless Claims (11/18) 8:30 a.m. Initial Claims (11/25) 8:30 a.m. PCE Deflator (October) 8:30 a.m. Personal Consumption Expenditure (October) 8:30 a.m. Personal Income (October) 9:45 a.m. Chicago PMI (November) 10 a.m. Pending Home Sales Index (October) Earnings: Ulta Beauty , Salesforce , Kroger Friday, Dec. 1 9:45 a.m. Markit PMI Manufacturing final (November) 10 a.m. Construction Spending (October) 10 a.m. ISM Manufacturing (November) Earnings: Dominion Energy , Cboe Global Markets , Cardinal Health , Gartner